Exploring Rationality

1. Much of economic theory is based on the belief that even if
individuals do not always act rationally, enough of them do enough of
the time so that the assumption that people are rational is a
reasonable approximation of reality. What do economists mean when
they say people are rational? Are you rational? Are most of the
people you know rational?

2. One of the ways of stating the rationality assumption is,
"There are no bozos." What does this statement mean? Did P.T. Barnum
accept it when he said, "There is a sucker born every minute?"

3. The logic of choice assumes that people are rational, which means
that people have well-defined goals and that they purposefully and
logically act to attain those goals as best they can, given their
circumstances. You might note that economics does not judge goals as
rational or irrational. Economists almost always take goals as given.
People are irrational if, given their goals, they act in ways that do
not lead to the accomplishment of their goals.

Use an internet search
engine to find the strange story
involving "Meiwes" and "Brandes." What did they do that made them
newsworthy? Can you argue that Meiwes was rational? How about
Brandes? If what they did is rational, what does it take for behavior
to irrational?

4. Roughly one in 50,000 people who run a marathon dies as a
result. Is this evidence that people are irrational? Explain your
answer.

5. People pay for bottled water when the alternative is safe and
pure tap water that is free. Does the market for bottled water
indicated that people are irrational? Explain your answer.

6. What is spite? Can acting spitefully be rational? Defend your
answer.